The real estate sector in the country has been affected by
multiple reasons including high inflation, decrease in remittances by overseas
Pakistanis, negative effects to the country's economy and poor return on real
estate business.

The local real estate market was also hit by the global
recession, which shows no sign of easing and in fact has further threatened the
world economy.

According to real estate agents, owing to the increasing
demand of small house units of 3-5 Marla, there exists tremendous investment
opportunities in the real estate and housing sector in the urban areas of
Lahore.

Experts believe that demand of houses would significantly
increase within next few years. Housing backlog stood at 4.30 million in 1998
which, according to current projections, stands at 8.8 million. About 350,000
housing units were established in 2006 with an investment of Rs 150 billion plus
cost of land for the construction.

The Federal and Punjab governments have also planned
construction of small housing units that will give boom to the construction
industry. It may be mentioned that domestic cement demand in 2006-07 was
21,034,278 tons. Per capita cement consumption was 137 kg while immense
potential was available for cement export to earn huge foreign reserve for the
country.

An expert in the housing and construction industry told PAGE
that the whole world, especially the west and UAE, was badly affected after the
real estate sector collapsed.

They said every fourth house in the west was at default
mainly because banks had failed to secure loans and customers had failed to pay
debts. "However in Pakistan, loans are granted only for house purchase or
renovation of houses and then again they are secured and guaranteed," they
added.

"The House Building Finance Corporation (HBFC) grants loans
only to buy property in a project that has already been made. Where will a
borrower go if the house is already standing and it can be auctioned off in case
a customer turns into a defaulter?" they added.

The real estate meltdown had taken place in the west and the
UAE, as projects were being made purely on investment basis due to which there
had been more of supply than demand. "In Pakistan, we already have a backlog of
8.8 million houses at the lower and middle income level, so if housing projects
are introduced here, then usually there is a tremendous response to them too,
they said.

They said: "Despite the fact that we bristle with the highest
interest rates and lending rates, the shortage of houses always create a healthy
demand in the market."

According to them, the government could aid to uplift the
real estate sector but appeared to remain uninterested. The real estate sector
in the country has been affected, as developed residential areas have witnessed
a minor decline of up to 10 per cent whereas the developing areas have been
affected by 15-20 per cent.

They explained that the recession led to prices remaining
either stagnant or reducing as demand for properties also dipped. They also said
that many overseas Pakistanis had been affected by the recession and they had
also not invested into the country in the real estate sector.

The decline in inflow of capital from abroad also led to
their taking out less money for property purchasing, thereby adversely
influencing property prices, they added.

As the global economic environment continues to deteriorate,
access to international capital markets looks to become even more difficult, and
risks to both exports and remittances have increased. The changing economic
environment thus has serious medium-term implications, particularly for growth
prospects, given the country's diminished ability to finance even moderate
fiscal and external account deficits, they added.